Professional Documents
Culture Documents
of
the
postal
sector.
1. Introduction ............................................................................................................................ 1
2. Theoretical Foundations ......................................................................................................... 2
2.1.ImplementationofNewBusinessorInnovationModelsinCompanies ....................... 2
2.2.OpenInnovationModels.................................................................................................................... 3
3. Models on Influencing Factors............................................................................................... 5
3.1.HolisticInnovationManagement................................................................................................... 5
3.2.ServiceInnovationModel.................................................................................................................. 7
3.3.FactorsInfluencingtheImplementationofOpenInnovationModels ........................... 8
3.4.PreliminaryConclusion...................................................................................................................... 9
4. Factors Influencing the Implementation of Open Innovation Models in the Postal Sector . 10
4.1.ThePostalSector.................................................................................................................................10
4.2.IndustryRelatedExternalFactors ..............................................................................................10
4.3.FirmSpecificExternalFactors......................................................................................................12
4.4.InternalFactors ...................................................................................................................................15
5. Conclusion............................................................................................................................ 17
6. Limitations and Implication for Future Research ................................................................ 18
References ................................................................................................................................ 19
1. Introduction
Until recently, innovation management in most companies has mainly focused on internal
innovation processes. But new models of so called Open Innovation make companies
rethink their innovation management: ideas are no longer exploited just from inside the
company but also from outside of the firms boundaries, as it is assumed, that such purposive
in- and outflows of knowledge and resources will result in better innovation performance (De
Jong et al. 2006, p. 15-16). Many companies in different industries are currently transforming
their innovation strategies from closed innovation management to open innovation models.
Therefore, their innovation management changes from centralized R&D to open innovation
models. This change is also noticeable in service industries, where intensified competition
and increased technological dependency lead to the necessity for such companies to become
and stay innovative. An example of a service industry undergoing enormous changes over the
past decades is the postal sector, which has been going through a profound process of reform
(liberalization). The major motivation for such liberalization was and still is the belief that
competition stimulates, among others, process and product innovation, both of which are
important vehicles for economic and productivity growth. The ability of any operator to create
and sustain competitive advantages over the long term will depend largely on how well the
operator deals with changes in its environment and manages to exhibit innovative behavior. In
a changing environment, innovation is a key to adapting to change, overcoming
organizational weaknesses, and adding value to the organizations products and services
(Sund 2008, p. 6).
In their overview of the existing literature on open innovation models, Fredberg, Elmquist and
Ollila (2008) reveals open innovation as a very young field in which the most energy has been
put into a fascination for the subject as such. Researchers have mainly explored open
innovation models with a strictly firm-oriented perspective and referred to a very limited
number of cases (such as IBM, P&G, Air Chemicals and Innocentive). But the research field
is expanding in many directions and the ongoing debates cover a multitude of areas connected
through the overall aim of understanding how both high- and low-technology companies can
become more innovative. A recent study by Laursen and Salter (2006) indicates that the open
innovation model should not lead to the interpretation that all companies act according to herd
behavior and practice identical or very similar modes of governing innovation. Huge
variations exist across as well as within industries and companies (Christensen 2006, p. 48).
In this paper, we discus open innovation models from both an industrial- and a firm-oriented
perspective and analyze external and internal factors that are influencing the implementation
and diffusion of open innovation models.
2. Theoretical Foundations
2.1. Implementation of New Business or Innovation Models in Companies
Based on reform processes and intensified competition, companies search for emergent
innovation models to gain competitive advantage and to increase their performance. The
implementation of such new models requires decisions on strategy and execution from the
companys management (e.g. Porter 1996). Strategy is about performing different activities
from those of rival companies or performing similar activities in different ways. Strategy
always involves risk, because theres uncertainty about consumer behavior, competition, and
technological change (Rosenzweig 2007, p. 156). Another source of risk comes not from all
the outside the company, but from uncertainties surrounding internal capabilities. In contrast
to strategy, the execution takes place entirely within the company and it is all about carrying
out the choices. It refers to the way that people, working together in an organizational setting,
mobilize resources so support the strategy. Despite the companies best efforts, the ways that
people and processes work together in complex organizations are very hard to untangle and
even harder to transplant elsewhere with the same results (Rosenzweig 2007, p. 152). The
study of Bloom and Dorgan et al. (2002) points out that the same practices used in one
company may lead to somewhat different results in another company. This means that
execution, like strategy, doesnt lend itself to predictable cause-and-effect relationships. It is
necessary for each companys management to define the most important elements of
execution by answering the following key question: For our company, at this time, competing
against our rivals, which of the many dimensions of execution are most important
(Rosenzweig 2007, p. 154)? Therefore, the challenges for companies that are implementing
new practices like open innovation models are two-fold. First, they have to analyze the factors
that are influencing their decisions in general and their innovation management in particular
(strategy). Second, an individual adaption of the models according to these influencing factors
is essential for every company (execution).
broader range of alternatives to benefit from innovation, and it also enables to recover false
negatives by acquiring them later (Chesbrough 2003, p. 25). In their study on different
companies using open innovation models, Gassmann & Enkel (2006) identify three core
processes within open innovation models (p. 134):
Figure 2: Core Processes in Open Innovation Models
Outside-in processes
The outside-in process combines the internal knowledge of a company with external
knowledge of customers, suppliers, or partners and through an active transfer of technologies
from other companies and universities. The opening of the innovation processes and the
integration of external knowledge sources through cooperation with suppliers and customers
can be a core competency of a company. Companies in low-technology industries, in
particular, are concentrating on the outside-in process in estimating spillovers from
technology-intensive industries (Gassmann & Enkel 2006, p. 134).
Inside-out processes
The inside-out process encourages the external commercialization. Through licensing, the
time-to-market gets shorter and technologies are better multiplied than possible in an internal
exploitation. The different inside-out processes can be described as an effective utilization of
the internal knowledge through the opening of the companys boundaries. Companies
focusing on the inside-out process are strongly engaged in research. These firms, mostly high-
technology companies, aim to reduce their fixed costs for research and development as well
as to share the risk of innovations with other companies (Gassmann & Enkel 2006, p. 135).
Coupled process
The coupled process links the integration and externalization of knowledge for conjoint
innovation processes in alliances, joint ventures, and innovation networks. There are two
main conditions to be considered for the implementation of cooperative innovation processes
in a company. First, companies must be able to adopt external knowledge and integrate it into
the own knowledge and technology base. Secondly, they have to externalize internal
knowledge to let the partners profit. The success depends on the selection of the right partner
for a fruitful cooperation (Gassmann & Enkel 2006, p. 136).
3. Models on Influencing Factors
There are different models either on factors that are influencing the innovation management
in general or on the implementation of open innovation models in particular. In this section,
we discuss three of them (paragraph 3.1.-3.3.) and combine them in an overall model on open
innovation and its influencing factors (paragraph 3.4.).
3.1. Holistic Innovation Management
The model on holistic innovation management combines the market-based-view with the
resource-based-view (e.g. Porter 1998) through integrating the environment of the company
as well as the internal capabilities and resources in an integrative approach. The model
focuses on the innovation process and on four areas of influence: customer, competitor,
employee, and system (Schaller, Rackensperger & Reichwald 2004, p. 58). The four areas of
influence are important for all steps in the innovation processes; they influence not only the
planning and the realization but may also trigger innovation projects (Reichwald & Schaller
2006, p. 177). The goals of this model are the customer acceptance; based on both qualified
capabilities of the employees and a carefully chosen innovation network; the conformity of a
companys system with its environment, and sufficient protection of the products and services
against imitation (Reichwald & Schaller 2006, p. 177).
Reichwald & Schaller (2006) adopt the holistic innovation model to the specific
characteristics of service innovations (p. 175):
It is assumed that customer orientation and integration result in a sustainable competitive
advantage. Furthermore, customer orientation can reduce the market uncertainty, which
evolves from the intangibility of services. The major challenges are the forecast of future
customer needs and the transformation of these needs into marketable solutions. In this
context, the interaction or even integration of customers in innovation processes is reasonable.
In the service innovation management, competitors are an important area of influence to
consider. They are not only used as a benchmark but also for differentiation (Reichwald &
Schaller 2006, p. 175). New or changed services ask for new capabilities. Since clients are
often involved in the service production process, the perception of the service quality strongly
depends on the employees behavior. Thus, the employees are relevant in the focus of every
service and essential for quality oriented service innovation processes (Reichwald & Schaller
2006, p. 176). Another area of influence is the integration of the innovation management in
the culture and systems of a company. This is particularly important when the innovation
processes are opened up and external resources need to be integrated into the existing systems
(Schaller, Rackensperger & Reichwald 2004, p. 59).
strategy or strategies and its prior experience with innovation (Pavitt 2005, p. 87). The ability
of the enterprise to integrate external knowledge in an efficient and effective way and to build
up collaborative relations with partners for cooperative innovation development are other
internal factors influencing the implementation of open innovation models (Schaller,
Rackensperger & Reichwald 2004, p. 60).
3.4. Preliminary Conclusion
Combining all three models on influencing factors we identify the following model on factors
influencing the implementation of open innovation models:
Figure 6: Open Innovation Management and its Influencing Factors
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alternatives to their current methods. Research shows that the importance of innovation is in
general positively associated with environmental uncertainty (Drechsler & Natter 2008, p.
14). Chesbrough (2007) states that the advent of opening up the innovation process is mainly
caused by such an uncertain environment and increased economic pressure on firms (p. 21).
Drechsler and Natters study (2008) on antecedents and drivers of open innovation confirms
that companies which act in markets with increased competition are forced to use not just one
but several external sources in innovation in order to boost their innovation success (p. 22).
Industrial economics, in contrast, argue that the increased innovativeness of postal operators
is mainly caused by political factors: the perspective of full market opening allows
governments and owners to tighten their request for profitability. Claims for consistent
development of relevant technologies and for a new quality of services let postal operators
reengineer their business and develop new services (Jaag, Maegli, & Schaad 2007, p. 71).
Both perspectives have in common that they favor the use of external partners in innovation
processes in order to survive in the market.
Another important economical driver for an increasing innovativeness of postal operators are
diminishing profits in the core business (e.g. decreasing mail volume) through technological
factors like the substitution of traditional products through virtual solutions. This trend is
strongly affected by the emergence of new information and communication technologies. The
emergence of ubiquitous availability of information technology allowed for the convergence
of classic and electronic mail services, leading to the introduction of innovative products
(Jaag 2008, p. 151).
As a consequence of the political, economical, and technological transformation processes,
today many postal operators rethink their innovation management. Therefore, the industryrelated external factors determine when companies implement new innovation models.
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interest of the economy in knowledge and technology transfers with research institutions is
enabled through new modes of transfer. Companies no longer act as passive knowledge
recipient but as knowledge partners for universities and actively involve their requirements
into the transfer processes (Zinkl & Binet 1997, p. 50). An example of collaborative
innovation processes between universities and postal operators is Swiss Posts PostLab.
Established as an incubator in 2008 at EPFL (Ecole Polytechnique Fdral de Lausanne), the
goals of PostLab are to build up strong connections between the scientific and the industrial
world and to integrate scientific knowledge into the innovation processes of Swiss Post.
To define the degree of an innovation, competitors are important benchmarks. The question
new for whom? is answered with new for the industry or new for us and the most
important competitors. In relevance to differentiation, competitors are also considered for the
processes of design, implementation, test, or introduction on the market (Reichwald &
Schaller 2006, p. 175). Although innovations with competitors may initially seem
counterproductive, strategic relationships with competitors are an additional possibility to
increase the innovativeness of a company. Ritter (2005) identifies two major advantages of
such cooperation (p. 629):
The cooperation of service companies like postal operators with competitors is often
hampered by the intangibility of services and the missing protection against imitation
(Schaller, Rackensperger & Reichwald 2004, p. 54-55). Nevertheless, postal operators
nowadays exchange their knowledge on technologies and their applications to the different
core businesses. TNT and Swiss Post, for example, are engaged in a collaborative innovation
process on the development of ecological sustainable vehicles.
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Some of the worlds historical postal operators recognized the customer as the most important
external enabler of innovation (Sund 2008, p. 17). Customer lifestyles and demands have
profoundly evolved, in a significant part due to the development of information and
communication technologies. Customers today prefer tailored services that take into account
their differentiated needs. Moreover, in the information society customers ask for ubiquitous,
interactive, and flexible services. Therefore, it is logical that many studies have found that
both innovation and market orientation have important effects on the long-term performance
and survival of firms (Sund 2008, p. 8). In an uncertain environment, new needs and wants of
customers can be created and new opportunities for profit explored. In an earlier study by the
Chair MIR of the EPFL (Abdallah, Felisberto & Finger 2006), it was found that evolving
customers demands is one of the most important drivers of change in the postal sector.
Hence, customer orientation is essential for companies in the postal sector and the integration
of customers into the innovation processes in terms of the outside-in processes reasonable.
The lead-user approach (e.g. von Hippel 2006) is a crucial example of customer integration
modes and is often seen as starting point for the opening of innovation processes (Reichwald
& Piller 2006, p. 130).
According to Fredberg, Elmquist and Ollila (2008), the problem of organizing the external
environment to make use of the wisdom of the outside is just one reason for the limited
number of firms using open innovation. Another issue is that even if the firm manages to do
that, a core problem is to organize internally to make use of the innovative ideas and
knowledge (p. 29). Consequently, the firm-specific external determinants as well as the
internal factors influence how the new innovation models are implemented. In the next
paragraph, some internal factors influencing the realization of open innovation models are
analyzed. To make the practical relevance more explicit, we apply them to the case of Swiss
Post.
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There are certain premises needed to increase the potential for innovations
Swiss Post commits itself to the use of open innovation models. Innovations occur with
partners (customers, universities, suppliers and other partners). The opening of the
innovation process and the selective linking of internal and external knowledge increase
the innovative strength of Swiss Post.
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Open innovation champions to manage the process that incorporates the innovations in the
business along with revised internal processes, metrics, and incentives are important for the
implementation of the strategic goals through the open innovation management (Chesbrough
& Kardon Crowther 2006, p. 235). The open innovation management includes the
organization of the open innovation processes. Open innovation processes combine internal
and external ideas into architectures and systems and utilize business models to define the
requirements for these architectures and systems (Chesbrough 2006, p. 1). Due to the missing
technologies and the restricted IP rights for services, service companies like postal operators,
in contrast to high-technology industries, mainly focus their open innovation processes on the
integration of external technologies (outside-in processes) and on knowledge management
(coupled processes) (Stucki 2008, p. 40). There is a general observation and assumption that
though open innovation increases the potential creativity in the innovation process, it also
increases the complexity involved in managing the process. An open innovation process
demands that managers can handle both the inside and the outside of the organization
(Fredberg, Elmquist & Ollila, 2008). This corresponds with the results of Sunds survey
(2008), where the respondents identify the top-management as the most important stakeholder
in encouraging innovation within a postal operator. In fact, studies have shown clearly that
leadership and senior management support for innovative ideas and new product development
is crucial for the performance of the innovative process. Without this support there is little
chance of innovative projects making it (p. 17).
Top management is just one important aspect of the internal capabilities within a company.
The realization of new innovation models leads to different internal adaption processes. The
employees have to integrate and apply the new principles in the innovation processes
(Reichwald & Schaller 2006, p. 176). Hence, an innovative culture has to be implemented in
the company. Firms with an innovative culture create an atmosphere where entrepreneurship
and risk taking are encouraged and are rewarded and where individuals or teams are not
punished inadvertently when new products or services do not achieve expected results. A
climate of openness and informal communication is typical in the firms. Literature on new
product development provides ample research-based evidence that a strong innovation culture
has a positive impact on expected results (De Brentani & Kleinschmidt 2004, p. 312).
Because of shorter innovation cycles and dynamically changing customer needs, knowledge
management is essential for service companies (Kleinaltenkamp & Frauendorf 2006, p. 360).
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Both external and internal knowledge need to be connected, managed, and implemented into
the culture and systems of a company. An open innovation culture and the facilitation of
knowledge communities (e.g. communities of practice) are therefore important conditions for
an efficient and effective knowledge management (Kleinaltemkamp & Frauendorf 2006, p.
370). There are three major tasks in knowledge management: knowledge acquisition (make or
buy), knowledge integration (integrate or relate) and knowledge exploitation (keep or sell)
(Fredberg, Elmquist & Ollila 2008, p. 16). Thus, knowledge management includes the
management of basic conditions supporting the accumulation of knowledge and all
information, communication, and learning processes that increase the innovativeness of
companies (Grizelj 2006, p. 84).
As a consequence of the reform processes and the increased competition, in 2008, Swiss Post
decided to implement and diffuse open innovation models and established an innovation
program to adapt the internal processes and capabilities to the open innovation. The
innovation program consists of the three major aspects architecture, culture, and
communication (Swiss Post 2008b). The architecture defines the structures, platforms, and
processes of Swiss Posts innovation management. An example of a recent development is the
creation of an innovation jury allowing rapid decisions on innovation projects, leading to an
increased number of both product and process innovation and shortened development
processes. Innovation platforms like the previous mentioned PostLab, Postidea (virtual
management of employees innovative ideas), and an intentional knowledge management
further increase the innovativeness of Swiss Post. Another goal of the innovation program is
the diffusion of open innovation into all process of the enterprise through strategic initiatives
like innovation workshops, active knowledge management, and intended communication.
5. Conclusion
In this paper we address the emergence of open innovation models and their implementation
in industries undergoing profound transformation processes. We assume that the
implementation of such models is influenced by external and internal factors differing from
both an industrial- and a firm-oriented perspective. Existing models on service innovations
and on the implementation of open innovation models reveal the challenges that companies
are facing in their decision processes concerning the implementation of open innovation
models. By analyzing the innovation management and the implementation of open innovation
models at the postal sector, we identify two major conclusions:
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How does the influence of the different external factors vary over different time
periods, countries, industries, and companies?
How can companies adapt open innovation models in reference to their industryrelated, firm-specific, and internal determinants?
What factors are necessary for the implementation of open innovation models?
The contribution of this type of research will be to complete the framework on influencing
factors and to give recommendations to companies in transformation processes on how they
could best adapt open innovation models to their specific situation.
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